Rebuilding Through Repatriation: How Corporate Cash Can Save America's Infrastructure

S&P Global
Written By: Beth Ann Bovino, Jason Gold and Shripad Joshi
S&P Global
Written By: Beth Ann Bovino, Jason Gold and Shripad Joshi

With an onerous and outdated U.S. tax code keeping American corporations from repatriating the more than $2 trillion they hold overseas, S&P Global is proposing a deal in which companies can take advantage of a limited tax holiday in return for investing a percentage of the earnings they bring home in U.S. infrastructure.

Our neglected infrastructure

America’s infrastructure is crumbling. Meanwhile, U.S. companies hold a record $2+ trillion abroad, due to a broken tax system. S&P Global proposes a solution: Overseas money comes home untaxed, as long as companies invest 15% to fund U.S. infrastructure. This would fuel major economic growth and create hundreds of thousands of jobs in the years to come.

Funding is the question

The consensus among Americans, including our two presidential candidates, is that U.S. infrastructure has reached a dangerous state of disrepair and desperately needs investment. In fact, the American Society of Civil Engineers gives our infrastructure—bridges, roads, water systems, rail networks, and other public works—the grade of ‘D+,’ yet there’s no consensus around how to pay for this work.

Meanwhile, American companies currently hold a record-high $2 trillion overseas because the daunting federal tax rate, combined with an intricate web of deductions and credits, traps earnings abroad.

A tax holiday that would benefit everyone

S&P Global has identified a straightforward plan to both incentivize companies to bring that money home and benefit everyday Americans by creating a tax holiday for infrastructure investment. There is bipartisan support, including the presidential candidates, to address this country's infrastructure problems, but there is little consensus on how to fill the huge gap between what the government can finance and how much money is needed to pay for these projects. Private capital can be part of the solution.

Private capital can be part of the solution.

Beth Ann Bovino, U.S. Chief Economist at S&P Global Ratings

This tax holiday allows companies to bring their funds back untaxed, with 15% of the cash directed to ward investments such as infrastructure bonds sold by state and local governments. These projects are not limited to bridges and tunnels but extend to broadband and smart-energy grids, key factors to sustainable U.S. economic competitiveness. Further, by tying these funds to infrastructure bonds rather than tax revenue, the plan creates a more direct, dedicated path for infrastructure improvements.

An investment in our economy

S&P Global research demonstrates that infrastructure investment would spur economic expansion and create jobs through the “multiplier effect.” Specifically, every dollar invested in infrastructure would eventually add $1.30 to the economy. If companies brought back just half of their overseas money, that $150 billion would create roughly 307,000 infrastructure-related jobs in the first two years, although the economic benefits from increased productivity will boost jobs and growth well into the future.

The 15% in our proposal is a fraction of the standard U.S. statutory federal tax rate of 35%, and comparable with the 14% average effective U.S. corporate tax rate companies typically pay, due to our intricate web of deductions and credits. Further, infrastructure bonds are a comparatively stable, low-risk investment, and companies could eventually earn their money back–and then some.

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